Proposed tax rebate won't go far in state

Bush's plans stir little hope for economy

January 19, 2008|By Harriet Johnson Brackey Staff Writer

President Bush's $145 billion tax relief package is emerging at a tough time for South Florida, but economic analysts doubt it will help much as joblessness rises sharply and wages fail to keep pace with inflation in the region.

The president said Friday that he wants Congress to quickly roll out a plan that offers significant tax relief to businesses and consumers.

"Letting Americans keep more of their own money should increase consumer spending and lift our economy at a time when people otherwise might spend less," the president said.

In Washington, there is talk of an $800 tax refund for individuals, $1,600 for families and business tax breaks to encourage companies to invest in their own growth.

But in South Florida, as well as on Wall Street, Bush's plan didn't garner much support. Stocks started falling before the president's announcement was finished. The Dow closed down more than 59 points at 12,099.30.

While Wall Street signaled it didn't think the relief package was large enough, some in South Florida didn't think it would be effective or help people at the bottom rungs of the economy.

"It's very difficult to fine-tune a $14 trillion economy and get it just right," said Antonio Villamil, a former undersecretary of commerce and now head of Washington Economics Group in Coral Gables. Villamil said he thinks the stimulus package is late. And he said it could drive up inflation once the Federal Reserve's recent efforts to shore up the financial system begin to kick in.

"What I don't want to see happen is people thinking this will bring the economy back to life; it won't," said Germaine Smith Baugh, president and chief executive of the Urban League of Broward County. "They should be looking at ways to truly stimulate the economy, not just with an infusion of cash."

Judith Gatti, executive director of the Daily Bread Food Bank in Miami, which serves four South Florida counties, says the ranks of the working poor are growing. The organization's Broward County distribution center, for example, has about 95,000 pounds of goods, but it could use 250,000 pounds.

"$800 would be great; we would all appreciate that," Gatti said. "But $800 isn't going to turn an individual's life around."

Also Friday, the state's monthly jobs report showed unemployment rose 0.4 percent in December. Although the overall unemployment rate in Florida, at 4.7 percent, was below the nation's 5 percent rate in December, there was a troubling increase in the number of people who weren't working.

In 2007, the ranks of Florida's unemployed shot up by 49 percent. There were 441,000 people without jobs last December, compared with 297,000 in December 2006, according to figures from the Florida Agency for Workforce Innovation.

"What a difference from a year ago," said economist Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. "The housing market has gone from red hot to deep-space cold. That means less employees in that sector."

A similar surge in unemployment occurred at the end of 2001, when the ranks of the jobless increased by 57 percent in December compared with the previous year. At that time, Florida had 483,000 unemployed.

Not surprisingly, the largest job losses statewide were in construction, which shed 20,900 jobs, the state's monthly employment report showed.

Normally, December is a strong month for employment because seasonal workers get jobs in retail and tourism employment is strong.

Those industries did increase their payrolls in South Florida last month. However, the growth was not strong enough to offset the loss of jobs, in Broward, in wholesale trade, credit counseling and professional and business services and in Palm Beach County, in finance and banking. The number of jobs in state government also declined in both counties. Unemployment rose slightly in all three counties: Broward's rate is now 4 percent, Palm Beach 4.6 percent and Miami-Dade 3.9 percent.

People who are working in South Florida have seen their wages go up, but not nearly as much as inflation.

This week, the Bureau of Labor Statistics said average weekly wages in Palm Beach rose at 3.3 percent rate in the second quarter of 2007 and 3.8 percent in Miami-Dade, but South Florida's annual inflation rate last year, at 5.8 percent, was the highest of any metro area in the nation.

Pocketbook pressures are becoming the main issue in local and national politics.

Michael Townsend, vice president of legislative and regulatory affairs for Charles Schwab & Co., said he expects Democrats and Republicans to work together to deliver the economic stimulus package. He said a deal could be reached in the next week.

"Both sides are interested in doing something, because when members of Congress went home recently, all they heard was the economy, the economy, the economy," Townsend said.

Harriet Johnson Brackey can be reached at hjbrackey @sun-sentinel.com or 954-356-4614.

ONLINE

Watch video of President Bush as he outlines his emergency economic package at Sun-Sentinel.com/economy